Dick “The Buzzard” Bove Confirms That Another Bailout Is Imminent; The Question Is Which Bank?
--by M.F. Quintilianus (image by WilliamBanzai7)
Last night, the FDIC and the Federal Reserve released the “Living Wills” of nine separate Wall Street welfare queens. The plans, mandated under the Dodd Frank Act, are supposed to provide the FDIC with the means to conduct orderly bankruptcy proceedings for banks deemed Too Big To Fail, rather than bailing them out again, should they go belly up a second (ahem) time.
Even a glance at the Living Wills confirms that they do nothing of the sort, but are instead part and parcel of the massive Wall Street-Washington PR campaign to convince the public that all is well, and that there will not, repeat not, be further bailouts.
If that were actually the case, one would not expect to find these Living Wills chock full of preposterous and readily falsifiable misrepresentations, since financially prepared and sound financial institutions would have no need to resort to outright lying. Alas, disinformation is once again the order of the day.
Citigroup’s Living Will is representative of the untrammeled propaganda masquerading as regulation:
Citi today is a fundamentally different institution than it was before the crisis: smaller, leaner, safer, sounder, and completely focused on its core mission.
(Citigroup pdf at p. 29).
In point of fact, Citigroup is quite a bit bigger--$20 trillion bigger—than it was before the crisis. Back then, Citi’s book of derivatives amounted to a mere $31.9 trillion. Today, that same book is $51.9 trillion. Since getting bailed out, in other words, Citi has grown its derivatives gambling operation by 1.5 times the size of the entire Gross Domestic Product of the United States. And yet according to Citi, this planetary-sized increase in reckless risk qualifies as both “smaller” and “completely focused on its core mission.”
But it’s not the “Living Wills” themselves, as stuffed full of jaw-dropping lies and propaganda as they are, that’s the real issue here.
The real problem is that Dick Bove came on CNBC yesterday to dismiss them hours before they were released. To anyone with even a passing familiarity with Bove’s role as a pro-bailout Wall Street shill, his piss-poor record of forecasting is not news.
And yet, even the most studious followers of Wall Street’s kleptocratic machinations may not be suitably familiar with Dick Bove’s unwavering accuracy when it comes specifically to the New York Fed’s Primary Dealers—once one takes the negation of Bove’s forecasts, of course—which is downright unnerving:
- On March 11, 2008, Bove issued a “market perform” rating for Bear Stearns—an upgrade from just the prior month. Six days later, Bear collapsed.
- On, August 21, 2008, Bove upgraded Lehman Brothers to a “buy.” Three weeks later, Lehman collapsed.
- On October 26, 2011, Bove says he got a call from a guy in Switzerland asking if he had time to get all of his money out of MF Global. Confronted with this rational idea, Bove scoffed at the man’s “extreme point of view.” Five days later, MF Global collapsed.
Now comes Dick Bove to speak about the nine Living Wills filed yesterday, eight of which were filed by Primary Dealers. (Only Bank of America lacks that status.) So Bove’s statements about the Living Wills generally don’t really provide any clues as to which of the Primary Dealers will be the next one whose corpse will float to the surface of Scum Pond for all to see, making at least the pretense of resolution necessary.
Elsewhere, however, Bove has expressed immutable enthusiasm for one particular Primary Dealer, despite its widely publicized ineptitude at gambling. And therein we find the odds-on favorite for the next member of the Primary Dealer Dead Pool, which is none other than JP Morgan itself.
Two weeks ago, I asked why Jamie Dimon lied to Congress about JP Morgan’s bailouts. Looking ahead, I expressed some skepticism concerning Dimon’s testimony that JP Morgan’s loss on its London Whale trade was in fact limited to $2 billion.
Since then, it’s emerged that JP Morgan’s loss on its London “hedge” could climb as high as $9 billion.
So it’s clear that JP Morgan’s woes due to that massively bad trade alone are mounting. They are so bad that Wall Street’s head cheerleader, Dick Bove, himself described JP Morgan’s trade as “demoralizing.”
But no Primary Dealer's funeral is complete without its Bovian blessing, which Dick dutifully supplied by maintaining his “buy” rating on JPM even after its putative $2 billion London whale loss was announced.
It is no secret that when it comes to gambling, JP Morgan is the lead casino, what with its massive $71.5 trillion derivatives book. Dimon's $9 billion loss is mere adumbration, a trivial appetizer, prepubescent foreplay that promises oh-so-much more.
Nor is it a secret that Dodd Frank and the Living Wills do not even contemplate either derivative losses or losses that will inevitably occur due to imminently foreseeable events like a devaluation of the Euro.
The likelihood of what will happen when the stench of JP Morgan's insolvency gets too noisome to ignore may be found in the Living Will of the company itself, which, unlike every one of the eight other banks, in the required section on resolving the bank, sets forth this nugget of candor:
JP Morgan Chase has provided the Federal Reserve with comprehensive confidential supervisory information and analyses about the Firm’s businesses, legal entities and corporate governance and about its crisis management governance, capabilities and available alternatives to raise liquidity and capital in severe market circumstances.
(JP Morgan pdf at p. 29)
In other words, untold tons of JP Morgan's decomposed rot will be suctioned into Bernanke's giant colostomy bag and tossed under the rug. Thus, we may be certain of two things. First, under Dodd Frank, regulators will choose to allow JP Morgan to “recover” rather than “restructuring” the bank under the Act’s resolution authority. Second, when JP Morgan does collapse, whether under the weight of the London whale trade or some other Dimon-sanctioned foolishness, the public will bear the weight of the Federal Reserve’s bailout, which will be carried out “confidentially.”
Anyone who doesn’t foresee further taxpayer-funded bailouts to pay tribute to, i.e., bonuses for, the Kleptocracy is a textbook case of denial. Unfortunately that describes the witless army of 100 million or so, which believes the next election will make any difference at all.